Everyone who cares about America should want good China trade policy. No one should be happy if the Biden administration flounders on China. In a speech yesterday, United States Trade Representative Katherine Tai provided another review of Sino-American trade history and yet more promises of future steps, steps which are unlikely to work. The administration’s unwillingness to take meaningful action risks harming the country.

The policy path Ambassador Tai laid out featured:

1. Restarting exclusions processes for existing tariffs
2. Coordinating with allies on China trade policy
3. Reengaging Beijing concerning their commitments under the January 2020 “phase one” deal
4. Introducing new issues that go beyond phase one
5. Boosting domestic competitiveness

Tariff exclusions matter to a few companies. The China tariffs imposed by President Trump are wildly overrated in importance. They haven’t cut the trade deficit (COVID-19 did for a bit, but no longer) and the tens of billions in consumer costs attributed to the tariffs are rounding errors in annualized US personal consumption expenditure now approaching $16 trillion.

Talking with allies won’t work without demonstrated American
leadership first. Happily, the US has many friends. Unhappily, there are
clashing China interests. It’s easy to criticize the PRC, but trying to
coordinate responses despite different economic incentives, security concerns,
and political mechanisms produces endless chatter. US-EU-Japan-Canada-UK-Australia-Korea-whoever
cooperation on China trade is unavoidably limited, not to mention a hard sell
as “worker-centric.”

The Biden administration’s attachment to phase one is strange. They didn’t negotiate it, and it hasn’t resulted in China meeting its purchasing commitments or intellectual property commitments. Decades of evidence say talking with the PRC won’t change its economic approach, and senior administration officials have volunteered that it probably won’t this time.

To have a chance of success, then, reengaging on phase one
and any phase two requires a clear set of priorities and policy tools to
enforce a new agreement or move the US forward if there is no agreement. The
administration has offered neither. Negotiating with Beijing under those
conditions, again, and expecting a better outcome this time looks
like the definition of insanity.

Finally, while the administration’s domestic policy is far too big a topic for a blog post, competitiveness is a long-term challenge. Countries can’t become more competitive by saddling themselves with massive long-term debt. It didn’t work for Japan in the 1990s, it didn’t work for China in the 2010s, it won’t work for America now. Borrowing is easy, competitiveness is hard, and doing the easy thing never accomplishes the hard thing.

There was so little new in the speech that the top question
is why it even occurred. It may be the administration feels obliged to say it
will reengage with Beijing before taking necessary but costly action. Another
possibility is the Biden administration can’t come to a consensus internally
about China policy, just as the Trump administration often couldn’t.

But the combination of pretending domestic borrowing will
outcompete the PRC, holding more meetings, and still issuing policy IOUs raises
a disturbing possibility: The US is going to essentially accept harmful Chinese
economic behavior. Not only that China will refuse to change — which is
reasonable — it’s not worth confronting them. We’ll talk and borrow our way through,
instead.

Administration officials will deny this, of course but, after nearly nine months, they haven’t taken a single step off the path of economic acceptance. Acceptance is certainly what the financial and tech sectors want. Tai rightly noted that China’s global economic distortions have hurt American workers and firms for decades, then outlined a completely inadequate response. We shouldn’t accept it.

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